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Tuesday, February 19, 2013

Yet Another Storm Brewing Over Wind Production Tax Credit

Wow, talk about taking the wind out of a guy’s sails. Just minutes after President Obama urged the nation to support more wind power in his State of the Union address, Rep. James Lankford (R-OK) sure put a damper on things. He announced that his House subcommittee intends to challenge the new one-year extension for the production tax credit for wind power. That comes on the heels of a similar announcement last month by Rep. Darryl Issa (R-CA), who complained that the new wind tax credit extension is a “dramatic” change from previous versions.

The investigation threatens to throw yet another monkey wrench in the path of the wind industry, which is just coming off a banner year for wind production in 2012.

Trouble Ahead for the Wind Production Tax Credit

As Chairman of the House Oversight and Government Reform Committee’s Energy Policy, Health Care and Entitlements Subcommittee, Lankford isn’t just blowing smoke. According to our friends over at The Hill, Lankford said that the wind production tax credit will be “the subject of increased oversight.”

That sounds pretty tame until you consider the way Issa, who chairs the Since Issa chairs the House Committee on Oversight and Government Reform, framed his views on the new extension:

“In 24 hours the heavily subsidized wind industry has gone from the verge of collapse to a modern-day Gold Rush. H.R. 8 seems to create a perverse incentive to rush production of additional facilities…”

Why is This Even an Issue?

At issue, for those of you new to the subject, is a 1990′s-era temporary tax credit for wind power, which normally gets a routine extension every few years. It is intended to level the playing field between wind power and conventional energy, which has long benefited from enormous taxpayer subsidies.

Nothing being normal under Republican leadership in the House, this year the Obama Administration had to fight tooth and nail to win a one-year extension.

That would appear to be a hollow victory. Modern wind farms take at least 18 months to finish construction, and previous versions of the tax credit only applied to projects that were completed within the designated time frame.

So, why was the wind industry so happy with the new extension?

As it turns out, the new extension contains new language, making the tax credit apply to any project begun within the designated time frame, whether it’s completed or not.

That’s the sore point for Issa and Lankford, and now the game is to see how many projects they can exclude from the tax credit, by restricting the way the federal government considers that a project has actually begun.

Return of the Department of Energy

The Obama Administration hasn’t exactly been sitting on its hands while all this has been going on.

On Monday, the day before the State of the Union Address, the Energy Department released a glowing report on a wind project in Wisconsin, consisting of a single wind turbine at the Port of Milwaukee.

To highlight the interest of U.S. businesses in wind power, the Energy Department points out that ten different companies contributed to the project, which generates enough electricity to power the Port’s administrative headquarters with plenty left over to sell to the local utility.

That sounds like small potatoes, and it is. In the second phase of the one-two punch, on Tuesday morning the Energy Department released a report on Oregon’s Caithness Shepherds Flat wind farm. The massive, 845 megawatt wind farm (the equivalent of power for 260,000 homes) started up last fall and is credited with creating 400 construction jobs and 45 direct, permanent operating jobs without disrupting the ranch economy in its rural host community.

The choice of Shepherds flat was no accident, since it highlights the interest of major U.S. companies in alternative energy. In addition to federal support it was partly funded by a couple of U.S. wind power enthusiasts, namely Google and GE.

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